02/27/2014

What Document Should Be Used for Sellers After August 2015?

Several people have asked what document should be used as the settlement statement or Closing Disclosure for sellers after August 2015, when the CFPB’s final rule for integrated mortgage disclosures goes into effect.

Because the Closing Disclosure includes non-public information about the buyer’s loan, such as interest the rate, there have been concerns about how the final rule affects privacy components of the Gramm-Leach-Bliley Act and ALTA’s Best Practices.

When the rule goes into effect Aug. 1, 2015, sellers will also receive a copy of the Closing Disclosure. Under the rule, settlement agents will provide the seller with the Closing Disclosure reflecting the terms of the seller’s transaction. Due to privacy concerns, the Bureau will allow settlement agents to provide buyers and sellers with separate versions of the Closing Disclosure only showing information relevant to their transaction. These seller and buyer specific forms would be completed in accordance with 12 CFR § 1026.38.

To help illustrate the point, the Bureau produced a sample of a seller only Closing Disclosure at appendix H-25(I), which can be found on page 1,545 of the final rule. As a side note, if the transaction is an all cash sale or a business or investment sale not subject to RESPA, then the buyer, seller and settlement agent are free to agree to their choice of forms or state mandated forms as required.

As a side note, if the transaction is an all-cash sale or a business or investment sale not subject to RESPA, then the buyer, seller and settlement agent are free to agree to their choice of forms or state-mandated forms as required. While some states have laws requiring the use of a promulgated form in cash transactions, in general the HUD-1, Closing Disclosure or any other settlement statement can be used in cash transactions.